Oct 19, 2011

Leading business figures in Yangon warned last week that attempts to boost the exchange rate of the US dollar – and exports – might not be good for the country’s economic future.

U Hnin Oo, chairman of the Myanmar Shrimp Association, said recent export tax cuts and several other related plans, all seemingly to raise the value of the dollar here, were not necessarily good for the economy as a whole.

“Weak and falling exchange rates depress parts of the economy and hurt export-oriented businesses but in normal circumstances it’s better for the nation’s economy if the national currency is strong,” he said.

“The government has reduced taxes and tried to boost the exchange rate to stimulate the economy in the short term. But businesspeople should do everything they can to improve their operations in this period and find ways to reduce their overheads,” U Hnin Oo said.

He said that most exporters were recovering from a four-month period from early June when the dollar fell below K800 and stayed there, hitting a low below K700 in late August. Last week the dollar hovered at about K830 at official exchange centres on Thein Byu Road in Yangon.

U Soe Win, a patron of the Myanmar Fisheries Federation, said there was a possibility that the government’s actions to boost the dollar’s value, which have also included a substitution scheme for older cars that will see millions of dollars removed from the market, could be seen to be favouring a small minority of businesspeople.

“If a minority of exporters say that the government is making all of these changes for them, then there might be complaints from other business groups,” he said.

“What we are seeing now are just temporary measures, they are not cures to the problem of the exchange rate,” he said.

“What happens when all the old cars are exchanged? Will that push the value of the dollar back down again?” he asked.

A fisheries exporter based in Yangon said he was unaware of the intended purpose of the government’s car import substitution plan but was happy to see his business recovering as the value of the dollar rose.

“It’s good for us to see the exchange rate higher than it was because we’ve just come through a bitterly hard period and we need time to recover.”